Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
PG&E (PCG) is a stock many investors are watching right now. PCG is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 9.36, which compares to its industry's average of 16.56. Over the last 12 months, PCG's Forward P/E has been as high as 14.79 and as low as 8.28, with a median of 10.97.
PCG is also sporting a PEG ratio of 1.05. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PCG's PEG compares to its industry's average PEG of 1.45. Over the past 52 weeks, PCG's PEG has been as high as 1.54 and as low as 0.88, with a median of 1.13.
We should also highlight that PCG has a P/B ratio of 1.34. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.60. Over the past 12 months, PCG's P/B has been as high as 2.09 and as low as 1.16, with a median of 1.54.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. PCG has a P/S ratio of 1.41. This compares to its industry's average P/S of 2.52.
Finally, we should also recognize that PCG has a P/CF ratio of 4.89. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. PCG's current P/CF looks attractive when compared to its industry's average P/CF of 9.55. Over the past year, PCG's P/CF has been as high as 6.87 and as low as 4.26, with a median of 5.49.
Value investors will likely look at more than just these metrics, but the above data helps show that PG&E is likely undervalued currently. And when considering the strength of its earnings outlook, PCG sticks out as one of the market's strongest value stocks.
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This article originally published on Zacks Investment Research (zacks.com).